I’m a huge evangelist of penny stocks.
Love or hate them, they have the potential to deliver results — only if you’re prepared to put in the work, though.
Right now, there is a lot of attention (and spike) in energy penny stocks.
The obvious catalyst of this trend is the ongoing conflict…but it can get difficult if you’re not sure how to play your cards right.
The Good Side Of Penny Stocks
Penny stocks can be a good choice for folks with a small or limited account. If you can take risks properly, nice, reasonable returns are possible.
These are stocks of companies that have a small market cap and trade at a relatively low price.
And because they’re in a class of their own, they have their own catalyst. They often aren’t influenced by outside factors or affected by market events — unless something crazy pops up.
The Exception
I know I said penny stocks often aren’t affected by market changes…
But there are times when that’s not the case. There are certain major events that can change market conditions and trends.
A good example was in 2020 during the peak of the pandemic.
There was a surge in trading volume in the stock market and as the world tried to adapt, penny stocks in certain sectors went soaring.
Right now, there are a few sectors that are red hot — but Energy and Defense seem to be up there.
This is mainly due to the Russia-Ukraine conflict.
The ban on Russian oil by most countries and a couple of other factors are pushing oil prices — as well as energy stock prices higher.
This spike isn’t only limited to crude oil stocks…nuclear, green energy, and other alternative power-related stocks are changing.
How To Adapt To These Major Changes Hitting The Penny Stock Market
It takes a trader with a good appetite for risk and a sharp eye for opportunity to be successful with penny stocks.
It’s easy to blindly make mistakes that can cost your account if you don’t do your research.
Here are a few things to keep in mind to adapt to trends and market changes:
Rely On Your Knowledge And Skills
I talked about this point last week when I discussed how to handle FOMO.
Stop paying attention to that voice that is hell-bent on convincing you to jump while you can and catch a quick move.
That won’t work.
What will help you instead, is your analysis of the trade, using indicators to spot opportunities, and applying a strategy you’ve learned.
You’ll get to save yourself a lot of stress and money.
Stay confident in your abilities no matter how the market gets affected.
Keep Your Emotions In Check
To increase your chances of success, try as much as possible to turn off your emotions when trading.
Our fears, anxiety, greed, desire for perfection, and other emotions can get in the way of our decision-making process. This means the logical part of our brains — together with trading plans — would take the backseat.
That’s not good.
Part of this mindset is knowing when the conditions are right for trading.
It’s important to analyze the market’s health to determine if conditions are favorable for swing trading or not.
Even if you identify a good-looking setup in a stock, you have to stop to ask yourself if the trade is worth taking.
Keep Learning — Especially From Someone With More Experience
I’ve said this before…
A lot of new traders are inexperienced, and less than 10% will succeed.
Why? Because understanding the psychology of the market is key.
Anyone looking to trade penny stocks should put in the effort to learn…
But there’s something else that can give a beginner (or experienced) trader an edge.
If you do not have someone you can look over their shoulder and learn from — someone that has more experience than you and actually knows what they’re doing…
You should get one today.
When significant market changes happen, you need to adapt and position yourself to make the most of it.
That’s why it’s important to listen to the guidance of someone more experienced than you.
A mentor will give you the right advice, open your eyes to some opportunities you might not see, and save you from certain mistakes.
That’s not to say they’ll trade for you…your mentor should, ideally, help you broaden your knowledge so you have the confidence to make your own decisions.
